{"id":195343,"date":"2021-03-06T01:30:00","date_gmt":"2021-03-05T22:30:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/99-gone-in-60-seconds-how-a-polkadot-trader-may-have-crashed-dot-futures\/"},"modified":"2021-03-06T01:30:00","modified_gmt":"2021-03-05T22:30:00","slug":"99-gone-in-60-seconds-how-a-polkadot-trader-may-have-crashed-dot-futures","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/99-gone-in-60-seconds-how-a-polkadot-trader-may-have-crashed-dot-futures\/","title":{"rendered":"# 99% gone in 60 seconds: How a Polkadot trader may have crashed DOT futures"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3cc534bc88b\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3cc534bc88b\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/99-gone-in-60-seconds-how-a-polkadot-trader-may-have-crashed-dot-futures\/#Data_uncovers_the_planned_%E2%80%98attack\" >Data uncovers the planned &#8216;attack&#8217;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/99-gone-in-60-seconds-how-a-polkadot-trader-may-have-crashed-dot-futures\/#How_the_trade_is_executed\" >How the trade is executed<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong># 99% gone in 60 seconds: How a Polkadot trader may have crashed DOT futures <\/strong>&#8221;<\/p>\n<div class=\"post-content\" data-v-5a136f3a>On March 5, Polkadot (<a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/coinmarketcap.com\/currencies\/polkadot-new\/\">DOT<\/a>) experienced a flash crash at Binance perpetual futures which resulted in the contract trading as low at $0.20. While this could have been an honest fat-finger trading mistake, a number of indicators point to a planned-attack.<\/p>\n<p>While no hard evidence will likely ever emerge, the open interest increase just 24 hours ahead of the event indicates that an attacker could have generated a $8.3 million profit by manipulating Binance&#8217;s matching engine.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-03\/9d8df950-f2d1-43f2-b00f-58b29d2680b8.png\"><figcaption style=\"text-align: center;\"><em>DOT perpetual futures on Mar. 4, USD pricing. Source: Binance<\/em><\/figcaption><\/figure>\n<p>As shown above, during the 3-minute candle, $20.4 million worth of DOT contracts traded. Although the swift downside move was a 99.5% flash crash, it did not result in cascading liquidations. <\/p>\n<p>Futures contracts liquidations are calculated using the price of spot exchanges. Thus, a flash-crash exclusively on futures prices would not impact most traders. According to Binance:<em> <\/em><\/p>\n<blockquote><p>&#8220;The Price Index is a bucket of prices from the major Spot Market Exchanges, weighted by their relative volume.&#8221;<\/p><\/blockquote>\n<p>As per Binance&#8217;s support website, Polkadot coin-margined futures index price is composed of Kraken (DOT\/USD), Binance (DOT\/USD), Binance (DOT\/BTC), OKEx (DOT\/BTC) and Huobi\u2019s (DOT\/BTC) market.<\/p>\n<p>It is worth noting that this specific contract is coin-margined instead of the more liquid Tether-settled one. Cointelegraph recently analyzed those differences, stating that the Tether-based contract <em>&#8220;doesn&#8217;t need an active hedge to protect collateral (margin) exposure, thus it&#8217;s a better choice for retail traders.&#8221;<\/em><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Data_uncovers_the_planned_%E2%80%98attack\"><\/span>Data uncovers the planned &#8216;attack&#8217;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>For an attacker to set up this trade, the first step would be building a leveraged long position while simultaneously creating short exposure using another account.<\/p>\n<p>To create a flash crash while risking the minimum amount possible, preferably, this event should take place not more than a couple of days ahead of the planned \u2018attack\u2019.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-03\/e0cd91ce-1c49-42cb-afcf-a954eb693861.png\"><figcaption style=\"text-align: center;\"><em>DOT\/USD perpetual futures open interest. Source: Binance<\/em><\/figcaption><\/figure>\n<p>As depicted above, DOT\/USD perpetual futures open interest grew from 1.92 million DOT to 3.34 million some 30 hours ahead of the flash crash, equivalent to a $47 million increase.<\/p>\n<p>To differentiate the attack from a regular leveraged-long, one should track the long-to-short ratio. To maximize gains from the flash crash, the attacker would have created a substantially higher short leveraged amount, thus impacting the long-to-short ratio.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-03\/4a192905-2a41-4861-96b3-af8a65265147.png\"><figcaption style=\"text-align: center;\"><em>DOT\/USD perpetual futures long-to-short ratio. Source: Binance<\/em><\/figcaption><\/figure>\n<p>The data above shows that the average 4.25 ratio favoring longs was severely impacted during the open interest increase. This would confirm the theory of a coordinated attack.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"How_the_trade_is_executed\"><\/span>How the trade is executed<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>By holding a considerably larger net short position when both accounts are combined, the attacker would profit from a flash crash. All this entity needs to initiate the event is to market sell the net long position. This move would trigger a substantial sell order, crashing the futures contract. Meanwhile, the other account, previously net short, would score big.<\/p>\n<p>762,000 DOT contracts traded during the 3-minute flash-crash candle at a $26.73 average price. Considering the change in the long-to-short ratio, the attack most likely created a $30 million long position. Meanwhile, the secondary account held a $10 million net short exposure.<\/p>\n<p>Although far from the 99.5% price crash, this 19% drop from $33 likely generated a $9.5 million gain for the account holding the $10 million short exposure if 5x leverage was in play. On the other hand, the collateral lost for the $30 million long position amounts to $1.2 million is 25x leverage was deployed.<\/p>\n<p>It is important to emphasize that holders of Binance DOT futures contracts were unlikely affected by the flash crash. Therefore, the attackers&#8217; net long account should be holding a negative balance, which the Binance insurance fund will likely cover.<\/p>\n<p>The above calculations are mere speculations based on exchange-provided data. As previously mentioned, it is unlikely that hard evidence of this attack will ever surface.<\/p>\n<p><em>The views and opinions expressed here are solely those of the <\/em><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/noshitcoins\"><em>autho<\/em><em>r<\/em><\/a><em> and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.<\/em><\/p>\n<p><template data-name=\"subscription_form\" data-type=\"markets_outlook\"><\/template><\/div>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/99-gone-in-60-seconds-how-a-polkadot-trader-may-have-crashed-dot-futures\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# 99% gone in 60 seconds: How a Polkadot trader may have crashed DOT futures &#8221; On March 5, Polkadot (DOT) experienced a flash crash at Binance perpetual futures which resulted in the contract trading as low at $0.20. While this could have been an honest fat-finger trading mistake, a number of indicators point to&#8230;<\/p>\n","protected":false},"author":1,"featured_media":195344,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjEtMDMvNWRjN2YzOTctOGJjYS00Mjk4LWEwZDUtMzgyZDYzNTNlNmYwLmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74867,74863,74860,75846,74939,75168,73785,71407],"class_list":["post-195343","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-altcoin","tag-cryptocurrencies","tag-cryptocurrency-exchange","tag-futures","tag-market-analysis","tag-polkadot","tag-markets","tag-trading"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/195343","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=195343"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/195343\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/195344"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=195343"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=195343"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=195343"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}